What Credit Score Is Needed to Buy a House?

By Bill Lyons | Published on August 7, 2023

Are you thinking about purchasing a house in the near future? If so, you have probably heard that there are a lot of factors that will influence your potential mortgage interest rate, and one of them is your credit score. If your credit score is too low, you may not even qualify for a mortgage.

So, what credit score is needed to buy a house? Learn more about the importance of your credit score for a mortgage, and do not hesitate to reach out to a professional who can help you.

Credit Scores and the Home Buying Process

So, what is a good credit score to buy a house? When a lender offers you a home loan, they want to know that you will eventually pay back the loan. They need to figure out what your financial character is, and one of the most important factors they will use is your credit score.

If you have a higher credit score, it generally gives the lender more confidence that you’ll pay back your home loan on time. As a result, they may reward you with a lower interest rate, and they may make it easier for you to get to the closing table.

On the other hand, if your credit score is relatively low, your lender may be worried that you will not be able to repay your mortgage, and they may hesitate to give you the loan that you ask for.

That is why it is so important to check your credit score before you apply for a mortgage and take the necessary steps to maximize your score.

What Credit Score Do You Need to Buy a House?

When you are taking a look at your credit score for a mortgage, the exact credit score that you need will vary depending on the type of loan you take out. For example, if you are applying for a government-backed loan such as an FHA or VA loan, then credit score requirements for the mortgage may be more flexible. Since the loan is secured by the government, the lender takes on less risk and can offer more money to borrowers with lower credit scores.

On the other hand, if you are applying for a non-traditional mortgage, or if you are interested in a jumbo loan, you might be required to have a higher credit score. In general, the more money you borrow, the higher your credit score will have to be, but this is not universal. Every lender has slightly different policies when it comes to credit scores and mortgages.

What is a good credit score to buy a house?

In general, most lenders like to see a minimum credit score of 620 in order to approve your loan application, but this is not necessarily universal. While conventional loans require a credit score of 620 or higher, other loan types have more flexible credit requirements. For example, Griffin Funding makes it possible for borrowers with a credit score as low as 550 to qualify for a VA loan.

Keep in mind that a higher credit score typically leads to a lower rate and beneficial loan terms. Therefore, if you’re thinking about applying for a mortgage, it’s always a good idea to get your credit score as high as possible before submitting a loan application. If you don’t have a great credit score at the moment, consider taking steps to improve it or look into home loans for bad credit

Minimum Qualifying Credit Score by Loan Type

So, what credit score do you need to buy a house? As alluded to above, the minimum credit score required is going to vary depending on the type of loan you take out. At Griffin Funding, we want to make it as easy as possible for you to qualify for your next home loan. A few examples of the different types of loan packages we offer include:

VA loans

If you are an active member of the armed forces or a qualifying veteran, you may be able to take out a VA loan. In general, our minimum credit score required for a VA loan is 550, but we understand that everyone is coming from slightly different financial circumstances, and we will work with you to make your home loan as affordable as possible. There are a number of advantages that come with a VA loan, and one of them is that you may not be required to make any down payment at all.

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FHA loans

If you have a lower credit score, you may be able to qualify for an FHA loan, which is great for people who are purchasing a home for the first time. One of the key benefits of an FHA loan is that you can put as little as 3.5% down and, since the loan is backed by the government, you can still take advantage of beneficial loan terms. An FHA loan is often designed for people with credit scores around 550, but even if your score is lower, we may be able to work with you.

Conventional loans

The guidelines for conventional loans are set by Freddie Mac and Fannie Mae, and lenders must follow their guidelines when it comes to conforming loans. Thus, if you’re applying for a conventional loan, you’ll have to have a minimum credit score of 620, and there isn’t much flexibility in that regard. However, if you don’t meet the minimum credit score requirement for conventional loans, we encourage you to explore other loan types with more flexible credit requirements.

DSCR loans

If you are looking for a non-traditional loan, you might be interested in a DSCR loan. Debt service coverage ratio loans are great for real estate investors because you can qualify for financing based on a property’s cash flow rather than income. The minimum credit score required to qualify for this loan is 620, but if your credit score is higher, we may be able to give you even better terms.

Bank statement loans

If you want to qualify for a home loan with as little paperwork as possible, you may be interested in a bank statement loan. The minimum credit score required for this type of loan will vary depending on how much money you put down, but if you are willing to put more money down, you may be able to qualify for a bank statement loan with a 620 credit score. This could be ideal for you if you do not have a W-2 job, and it may allow you to get to the closing table more quickly.

How to Improve Your Credit Score Before Getting a Mortgage

Far too often, people apply for a home loan only to be surprised at how low their credit score is. You need to do everything you can to improve your credit score before you apply for a mortgage, and some of the top ways to do so include:

• Get a copy of your credit report: You are entitled to at least one free copy of your credit report every year from the three major credit bureaus. Be sure to ask for a copy, as there might be some mistakes on your credit report that could be artificially lowering your score. Correct those inaccuracies before you apply for a mortgage.
• Pay down existing debt: You should also pay down your existing debt before you apply for a mortgage. If you can pay down your existing debt, you can potentially improve your credit score by lowering your credit utilization rate. Paying off debt can also improve your debt-to-income ratio, which has a big impact on qualifying for a mortgage.
• Pay your bills on time: One of the easiest ways to improve your credit score is to always pay your bills on time. Making timely payments can improve your credit score over time, while missing something like a car or credit card payment can negatively impact your credit.

If you take these simple steps, you may be able to significantly increase your credit score before you apply for a mortgage.

Use Your Credit Score to Qualify for a Mortgage

Are you ready to purchase a house? Make sure to check your credit score to see if you can qualify for a mortgage. At Griffin Funding, a credit score is only one of the many factors that we will use to decide what the terms of your loan should be, and we can work with you to help you qualify for a favorable loan package for your next purchase. Contact us today to get the process started.

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.